Question: Describe how the Profit-Leverage Effect and Return-on-Asset Effect works. Suppose an organization has a $200 million revenue, purchases of $130 million, and profit of $13

Describe how the Profit-Leverage Effect and Return-on-Asset Effect works. Suppose an organization has a $200 million revenue, purchases of $130 million, and profit of $13 million before tax.

How much would profit increase with a 10% purchase cost reduction?

How much is the Return-On-Asset (ROA) after the 10% cost reduction?

How does this affect the company's Inventory Investment?

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